Vodafone 2014 Annual Report Download - page 106

1. Basis of preparation
This section describes the critical accounting judgements that management has identied as having a potentially
material impact on the Group’s consolidated nancial statements and sets out our signicant accounting policies
that relate to the nancial statements as a whole. Where an accounting policy is generally applicable to a specic
note to the accounts, the policy is described within that note. We have also detailed below the new accounting
pronouncements that we will adopt in future years and our current view of the impact they will have on our
nancial reporting.
The consolidated nancial statements are prepared in accordance with IFRS as issued by the International Accounting Standards Board and are
also prepared in accordance with IFRS adopted by the European Union (‘EU’), the Companies Act 2006 and Article 4 of the EU IAS Regulations.
The consolidated nancial statements are prepared on a going concern basis.
The preparation of nancial statements in conformity with IFRS requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the nancial statements and the reported
amounts of revenue and expenses during the reporting period. A discussion on the Group’s critical accounting judgements and key sources
of estimation uncertainty is detailed below. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future periods.
Amounts in the consolidated nancial statements are stated in pounds sterling.
Vodafone Group Plc is registered in England and Wales (No. 1833679).
IFRS requires the directors to adopt accounting policies that are the most appropriate to the Group’s circumstances. In determining and applying
accounting policies, directors and management are required to make judgements in respect of items where the choice of specic policy,
accounting estimate or assumption to be followed could materially affect the Group’s reported nancial position, results or cash ows; it may later
be determined that a different choice may have been more appropriate.
Management has identied accounting estimates and assumptions relating to revenue, taxation, business combinations and goodwill, joint
arrangements, nite lived intangible assets, property, plant and equipment, post employment benets, provisions and contingent liabilities
and impairment that it considers to be critical due to their impact on the Group’s nancial statements. These critical accounting judgements,
assumptions and related disclosures have been discussed with the Company’s Audit and Risk Committee (see page 62).
Critical accounting judgements and key sources of estimation uncertainty
Revenue recognition
Arrangements with multiple deliverables
In revenue arrangements where more than one good or service is provided to the customer, customer consideration is allocated between the goods
and services using relative fair value principles. The fair values determined for deliverables may impact the timing of the recognition of revenue.
Determining the fair value of each deliverable can require complex estimates. The Group generally determines the fair value of individual elements
based on prices at which the deliverable is regularly sold on a standalone basis after considering volume discounts where appropriate.
Gross versus net presentation
When the Group sells goods or services as a principal, income and payments to suppliers are reported on a gross basis in revenue and operating
costs. If the Group sells goods or services as an agent, revenue and payments to suppliers are recorded in revenue on a net basis, representing the
margin earned.
Whether the Group is considered to be the principal or an agent in the transaction depends on analysis by management of both the legal form and
substance of the agreement between the Group and its business partners; such judgements impact the amount of reported revenue and operating
expenses but do not impact reported assets, liabilities or cash ows.
Taxation
The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Group’s total tax charge
involves estimation and judgement in respect of certain matters where the tax impact is uncertain until a conclusion is reached with the relevant tax
authority or through a legal process. The nal resolution of some of these items may give rise to material prots, losses and/or cash ows.
Resolving tax issues can take many years as it is not always within the control of the Group and often depends on the efciency of legal processes
in the relevant tax jurisdiction.
Recognition of deferred tax assets
The recognition of deferred tax assets is based upon whether it is more likely than not that there will be sufcient and suitable taxable prots
in the relevant legal entity or tax group against which to utilise the assets in the future. Judgement is required when determining probable future
taxable prots, which are estimated using the latest available prot forecasts. Prior to recording deferred tax assets for tax losses, relevant tax law
is considered to determine the availability of the losses to offset against the future taxable prots.
Signicant items on which the Group has exercised accounting estimation and judgement include the recognition of deferred tax assets in respect
of losses in Luxembourg, Germany, India, and Turkey, capital allowances in the United Kingdom and the tax liability on the rationalisation and
re-organisation of the Group prior to the disposal of our US group, whose principal asset was its 45% interest in Verizon Wireless (‘VZW’). See note 6
“Taxation” to the consolidated nancial statements.
Notes to the consolidated nancial statements
Vodafone Group Plc
Annual Report 2014104